Donors maintain aid freeze to Malawi

International donors, who provide 40 percent of Malawi’s budget, have decided to maintain the aid freeze in the wake of a high-level corruption ‘cashgate’ scandal last year.

Some of the donors under Common Approach to Budget Support (CABS) say they will only be providing aid through project and programme financing, “to ensure that public service delivery to ordinary Malawians is not disrupted”.

The chief of the European Union mission to Malawi, Alexander Baum, said “more action is required to tighten the system to avoid continuous leakages.”

A report by British auditors commissioned by President Joyce Banda showed that $30 million had been stolen within a period of six months last year.

Baum:Challenges in publicfinance management continue to be serious

A statement released on Tuesday at the end of the second review of the CABS for the fiscal year 2013/14 held in the capital Lilongwe agreed that “challenges in public finance management continue to be serious”.

The second review examined progress in strengthening Public Finance Management (PFM) systems in the aftermath of the ‘cash-gate’ scandal. This was in line with the agreement following the first review in November 2013.

The development partners noted that the goal of achieving fully reliable public finance management systems is a long term endeavour and despite the progress achieved so far, some critical actions remain work in progress.

“These areas include the commitment and control environment of the public payment system, bank reconciliations, verification of the stock of arrears and accumulation of new obligations outside the system as well as the mutual re-enforcement of public sector reforms and PFM reforms,” reads the statement in part.

The CABS however expressed their commitment to supporting the people of Malawi in their development aspirations and pledged to continue direct aid to the people using “alternative delivery modalities such as project and programme financing, particularly in the sectors of health, education and social protection to ensure that public service delivery to ordinary Malawians is not disrupted”.

The donors have committed to support Malawi in the implementation of a “comprehensive strategic work plan” that will build on the current progress including implementation of recommendations from the forensic audit report (April-Sep 2013) and other ongoing Public Finance Management interventions.

“The success of this strategic approach over the medium term will require strong political leadership. In this regard, DPs will continue to be in dialogue and supportive of the efforts of the Government – current and in future – to drive the financial management reforms forward until the intended objectives are achieved.

“The aim is to build a credible, effective and efficient public financial management system over the medium term, capable of supporting public goods and service delivery in line with the Government of Malawi’s obligations to its citizens,” said the statement.

The CABS group is composed of African Development Bank, United Kingdom’s Department for International Development, European Union, Germany, Norway, and the World Bank.